Child care and early education (CCEE) educators are among the lowest-paid workers in the country, and are disproportionately women of color. Low pay has widely been attributed to challenges in recruiting and retaining qualified CCEE educators and to low morale in CCEE settings. A stable and qualified CCEE workforce is the backbone of accessible and high-quality CCEE for families with young children.
In 2021, the Washington, DC Council approved a tax increase on the city’s highest income residents to fund the nation’s first large-scale, publicly funded program to supplement the wages of CCEE educators. The Early Childhood Educator Pay Equity Fund (PEF) was created to bring CCEE educator salaries in line with similarly trained and certified educators employed by DC Public Schools. Since the program was launched in fall 2022, the fund has paid more than $110 million to more than 4,000 CCEE educators, amounting to annual payments from $5,000 to $14,000, depending on educators’ roles and responsibilities. The PEF also supports HealthCare4ChildCare, which has provided access to free or lower-premium health insurance to more than 1,000 educators and other CCEE staff, and their families.
The initial Pay Equity Fund payments worked quickly to increase the number of CCEE educators in DC.
In fall 2023, we published the first rigorous evidence on the efficacy of the PEF, examining whether the initial PEF payments influenced the hiring and retention of CCEE educators in DC. By Q4 2022—just two quarters after the launch of the PEF—the initial payments had increased CCEE employment levels in DC by about 100 additional educators, or about 3 percent. This was the largest positive impact among all U.S. counties in the analysis, suggesting that it was very unlikely to be due to chance. Our finding also affirmed reports from PEF participants surveyed by colleagues at the Urban Institute. Nearly two in three DC educators indicated that as a result of the PEF payments, they now planned to continue working in DC CCEE longer than previously expected. Many directors also reported that the payments had influenced their “best” educators’ decisions to stay at their facility and helped them recruit qualified educators to their staff.
Despite this success, the future of the Pay Equity Fund is uncertain.
The early positive findings on the PEF have drawn national attention, including from other states and localities seeking to implement their own wage supplement initiatives. This attention is due to the innovative nature of the PEF, which is the first program in the nation to enable CCEE educators to receive salaries comparable to public school teachers. The PEF, a non-entitlement program, was also the first wage supplement initiative legislated to provide sustainable funding over several years. In fiscal year (FY) 2025, the PEF was funded at about $70.5 million, with annual increases based on the Consumer Price Index beginning in FY 2026.
Based on the PEF’s success and enabling legislation, it came as a surprise when D.C. Mayor Bowser proposed to entirely cut funding for PEF in the FY 2025 budget and repeal legislative language supporting the program. The cuts were proposed as an expedient way to meet a demand from DC’s CFO to fund the city’s fiscal reserves, but have been met with strong opposition from CCEE advocates and the DC Council chairman. To help inform this consequential debate as it unfolds, we partnered with DC Action to continue to study the PEF to see how the strong initial findings evolved during the second year of the program.
New findings show that the Pay Equity Fund’s positive initial impact on the number of CCEE educators in DC has grown during its second year of operation.
Using updated federal employment data from the Quarterly Census of Employment and Wages (QCEW), we can now analyze CCEE employment numbers in DC and all other counties in the United States between 2019 and Q3 2023. This contributes three additional quarters of QCEW data that were published by the U.S. Bureau of Labor Statistics since our initial analysis. Combining this additional data with the methods of analysis used in our initial report, we see that by Q3 2023, the PEF payments were associated with an increase of 219 CCEE educators, or nearly 7 percent, over our best estimate of the CCEE employment level in DC without the PEF.
This analysis uses the QCEW and a synthetic control method to form a weighted combination of counties —a “Synthetic” DC—that is nearly identical to DC in terms of employment levels, wages, and the number of establishments, both within the CCEE sector and across all sectors, in the approximately four-year period prior to the PEF. The initial report includes a more detailed description of how the synthetic control method was implemented in this study and the data used in the analysis. We will share the full set of updated findings in a forthcoming technical report.
This effect was about twice what we initially reported based on data through Q4 2022. Without the PEF, our analysis suggested that the number of CCEE educators in DC would have remained more stagnant, increasing by just 95 workers over this period (shown as the dotted line above). With the PEF, DC has increased its CCEE workforce by 314 educators during the same span. Over the five quarters following the PEF, the updated findings suggest it led to an overall effect of 146 additional educators, on average.
These updated findings continue to show that the positive impact of the Pay Equity Fund on CCEE employment in DC is very unlikely to be due to chance.
But how do we know the increases in CCEE employment were because of the PEF and not something else? Are they statistically significant? We conducted a series of “placebo” tests, applying the same synthetic control method to each county in the analysis. Because these counties did not launch the PEF, we would expect smaller differences between each county and its synthetic control. Out of the 145 total counties, DC had the sixth largest overall impact as averaged across the five PEF quarters. In other words, DC’s impact was larger than that found in about 96 percent of all counties. This suggests this impact is statistically significant at the 4 percent level, which allows us to confidently rule out the possibility that the PEF had no impact on CCEE employment in DC. The significance levels for the impacts at the five individual PEF quarters range from 2 to 5 percent.
As for DC, the impact for each donor county in a given quarter represents the difference between the number of CCEE educators in that county and the number of CCEE educators in its synthetic control. The impacts for DC and for each donor county are standardized according to the “root mean squared error” (RMSE), a metric that corrects for donor counties that were poorly matched to their synthetic control.
This additional evidence on the effectiveness of the Pay Equity Fund should be a part of the pivotal decisions that will shape its future.
The PEF marks a shift in U.S. CCEE funding through its broad-scale alignment of educator compensation with that of public school teachers. The updated findings from our ongoing research into the efficacy of the PEF reinforce the fund’s potential as a tool for supporting the workforce that provides CCEE services and the DC families who need them. These results arrive at a pivotal time, as local policymakers confront budgetary decisions that could reshape the PEF’s future. As debate continues, it is important for discussions to be informed by a growing evidence base on the effectiveness of the PEF in its first two years of implementation. We encourage policymakers and community leaders to consider these findings as they make these crucial decisions.
